Speech By Minister of State Brian Hayes TD to the Kerry South FG Constituency Executive – Thursday Feb 16th

“Borrowing for current spending robs our children’s future”
“Interest payments on national debt climb from 2billion to 7.4billion in just 4 years”
The debate surrounding our national finances in recent years has focused on expenditure cuts, tax increases, bailouts and bond markets. The debate needs to be widened to take into account two issues which too date have not been part of that national conversation.
Both issues relate to borrowing and our national debt. The first is inter-generational equity and the second is the burden of interest payments.
It’s important that we differentiate between borrowing for investment purposes and borrowing for current spending. Borrowing at reasonable levels of interest rates for capital investment makes sense if the investment generates adequate returns. That is why the government will stay focused on the investment, enterprise and jobs agenda for 2012. We are determined to get this country growing again.
Borrowing for current spending however is much more problematic. There are serious questions of inter-generational equity to be addressed.
Borrowing for current spending is in effect this generation robbing its children in order to maintain existing standards of living. Effectively we are asking our children to take less in order that we might have more. Loading our children with the responsibility of repaying our ballooning debt is reckless and irresponsible.
Each generation has a responsibility to live within the means available to it. It is neither just nor fair that we should ask our children to pay the bills for our spendthrift ways. There needs to be a much stronger engagement by young people on the issue of borrowing and how it will be financed into the future. At a time of economic crisis and national renewal we don’t want young people standing on the sidelines. Their view on this debt mountain that they are being asked to shoulder for a very long time is crucial in framing our discussion on the public finances.
Those who oppose the government’s efforts to bring into balance revenues and spending also wilfully ignore the elephant in the room – interest payments on our national debt.
The figures are truly staggering.
In 2008 interest payment on our national debt came to 2.1 billion euro, which was equivalent to 5.1% of tax revenues. In 2012 interest payment on our national debt is forecast to reach 7.4 billion euro that is equivalent to 20.7% of tax revenues. Interest repayments for 2015 are expected to reach 9.2 billion euro, equivalent to 21.3% of tax revenues.
The vast bulk of Irish government borrowing is from external sources. Only a small percentage of the national debt is held by Irish citizens. This means that interest payments on the national debt is leaving the country. As far as the Irish economy is concerned interest payments on the national debt is worse than dead money. It is a river of resources leaving the country every year.
Those who advocate increased government spending never address this critical issue. They seem happy to watch the debt mountain climb as more and more scarce resources leaves the country.
In all the talk about bailouts, borrowing and bond markets we need to keep some simple principles in mind. There has to be a balance between revenues and spending, we need to stop growing the pile of debt and we need to be acutely aware of the wasteful treadmill that is interest repayments.
Just because we can borrow doesn’t mean we should do so. When a country borrows to excess it puts its hand in the dog’s mouth.
There remains an urgency regarding government borrowing and interest repayments on that debt. Stop growing the debt pile and controlling interest repayments will continue to be priority issues. Failure to do so will restrict our ability to grow the economy, will further damage our children’s prospects and will seriously undermine our capacity to sustain public services and public sector pensions into the future.
We were here before in 1980s. This government is determined to learn from the mistakes that were made then. Small open economies that are highly privatised, such as Ireland, must control their national debt. Getting the Debt down, over time, as a percentage of national income is an absolute priority.